Buy some VYM [Vanguard High Dividend Yield]?

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LilyFleur
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Buy some VYM [Vanguard High Dividend Yield]?

Post by LilyFleur » Tue Nov 12, 2019 2:07 pm

I am already retired (age 60) and am going to need more cash flow. I am thinking of buying $100,000 of VYM in my Schwab brokerage account (I would sell money market shares to do this.) The dividends would not be reinvested, and I would use them for living expenses.

I am receiving a five-figure pension that meets about 2/3 to half of my needs, depending on the year.

I also have a $100,000 home loan (my only debt) which I could pay off at any time. I may need the interest from the mortgage in order to itemize on my taxes but I need to run the various scenarios, and it gets complicated :shock:

Current approximate AA: Stock 47%/Cash 32%/Bonds 21%
Proposed AA: Stock 53%/Cash 25%/Bonds 21%

1. I have read here that dividends in a brokerage account create a "tax drag." I am in California, so I understand my qualified dividends will be taxed at the same rate as my regular income. But, if I need the income, isn't it better to spend dividends from a brokerage account that are taxed at the federal capital gains rate? Currently the money that I would invest in VYM is in a money market, and those MM dividends are taxed entirely--both federal and state--at the regular income tax rate. And the MM dividends in a downward trend along with interest rates. My other option to increase my cash flow would be to start withdrawing from my 401k--and that would be taxed at the regular income tax rate both at the federal and state levels.

2. I am having trouble researching this aspect of VYM. I think the Vanguard site says it is offered in admiral shares. How would I best buy VYM admiral shares through my Schwab brokerage account? I understand I will have to buy shares and not fractions of shares, that is not a problem for me.

3. What is the best timing to buy VYM? After the next dividend payout to allow enough time for my first dividend payout to be qualified dividends? (don't you have to have the stock for more than 60 days in order for the dividends to be qualified?)

Thanks in advance for all of your wise advice, BHs!!!!
Last edited by Flyer24 on Wed Nov 13, 2019 8:38 am, edited 1 time in total.
Reason: Edit title for clarity

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RickBoglehead
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Re: Buy some VYM?

Post by RickBoglehead » Tue Nov 12, 2019 2:15 pm

Since you're raising your equity percentage by doing this, why wouldn't you buy something like Vanguard Total Stock Market Index? Then you sell, generating capital gains, not dividends, which should be taxed by both fed and state the same, no?

As to increasing cashflow, why don't you simply USE the cash (money market)? Apparently this is only 25% of it.

I guess I'm not understanding why you want to increase your equity portion and generate dividends, versus selling equities (if needed which it isn't because you have lots of cash) to generate capital gains.
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Re: Buy some VYM?

Post by LilyFleur » Tue Nov 12, 2019 2:36 pm

RickBoglehead wrote:
Tue Nov 12, 2019 2:15 pm
Since you're raising your equity percentage by doing this, why wouldn't you buy something like Vanguard Total Stock Market Index? Then you sell, generating capital gains, not dividends, which should be taxed by both fed and state the same, no?

As to increasing cashflow, why don't you simply USE the cash (money market)? Apparently this is only 25% of it.

I guess I'm not understanding why you want to increase your equity portion and generate dividends, versus selling equities (if needed which it isn't because you have lots of cash) to generate capital gains.
Thanks for your response! I have read extensively the dividend-no dividend debates here, and I do fall on the side of liking dividends. If I simply start spending the cash, I lose my cash, rather than spending earnings. (I am not receiving subsidies on the ACA, so I do not have a super strong reason to spend cash only.) And I do want to preserve some cash for Roth conversions and to pay off my mortgage. VYM, I think, will earn more dividends each year for me to spend than my MM dividends. My risk tolerance is very high, and in fact I am a bit uncomfortable having the AA I currently have because my equities are very low compared to my past investing history. I did receive cash recently that changed my AA. I parked it in a MM to really consider what I wanted to do, but the Fed lowering interest rates has helped me want to increase my equity portion of my AA.

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Re: Buy some VYM?

Post by Jack FFR1846 » Tue Nov 12, 2019 2:58 pm

I'm no expert on VYM, but in my 10 second reading of it, does it not spill dividends? If so, you have no control over this income coming to you even if you're near a cliff.

I've thought that in this kind of situation, you want the opposite. No dividends, no cap gains until YOU decide you want some cash and YOU decide how much. So opposite world could be BRK/b, which of course pays no dividends. So if you're in a year where 20 cents more in income means no ACA subsidy, with VYM (my understanding), you've now given it up where with BRK/b, you simply don't sell.
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Re: Buy some VYM?

Post by unclescrooge » Tue Nov 12, 2019 3:06 pm

RickBoglehead wrote:
Tue Nov 12, 2019 2:15 pm
Since you're raising your equity percentage by doing this, why wouldn't you buy something like Vanguard Total Stock Market Index? Then you sell, generating capital gains, not dividends, which should be taxed by both fed and state the same, no?

As to increasing cashflow, why don't you simply USE the cash (money market)? Apparently this is only 25% of it.

I guess I'm not understanding why you want to increase your equity portion and generate dividends, versus selling equities (if needed which it isn't because you have lots of cash) to generate capital gains.
I believe capital gains are taxed as ordinary income in California.

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Wiggums
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Re: Buy some VYM?

Post by Wiggums » Tue Nov 12, 2019 3:12 pm

I don’t have a strong opinion on this question, but I thought you were better off with something like total stock market because the dividend fund was not as diversified and there are tax implications when the dividend find was held in taxable.

How much of a difference, I don’t know. I guess you can find examples on both sides of the fence.

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Re: Buy some VYM?

Post by WhiteMaxima » Tue Nov 12, 2019 3:31 pm

in a tax deferred account, preferable Roth:Yes.

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Re: Buy some VYM?

Post by rossington » Tue Nov 12, 2019 4:42 pm

LilyFleur wrote:
Tue Nov 12, 2019 2:36 pm

Thanks for your response! I have read extensively the dividend-no dividend debates here, and I do fall on the side of liking dividends. If I simply start spending the cash, I lose my cash, rather than spending earnings. (I am not receiving subsidies on the ACA, so I do not have a super strong reason to spend cash only.) And I do want to preserve some cash for Roth conversions and to pay off my mortgage. VYM, I think, will earn more dividends each year for me to spend than my MM dividends. My risk tolerance is very high, and in fact I am a bit uncomfortable having the AA I currently have because my equities are very low compared to my past investing history. I did receive cash recently that changed my AA. I parked it in a MM to really consider what I wanted to do, but the Fed lowering interest rates has helped me want to increase my equity portion of my AA.
Based on what you have stated here I am going to make a non-Boglehead suggestion which might apply to you. Take a look at the electric utility Dominion Energy (I know, it's an individual stock :shock: ). It is a proven dividend paying stock, fundamentally sound, very well managed,very low beta and as far as utilities go very safe. We're not talking PG&E here by any standard. It is cheaper than VYM and pays a higher dividend. Also it is one of the components of VYM (almost 3 mill. shares). Market volatility (which applies to both choices) is not as big an issue as you are looking primarily for the qualified dividends.
Just a thought... :happy
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: Buy some VYM?

Post by Cornflakey » Tue Nov 12, 2019 7:15 pm

I'm also a contrarian dividends aficionado.

My comment would be if looking for high and consistent Vanguard dividend yield turn to utilities (VPU) or to REITs (VNQ). As a long term investor in all three (reinvesting dividends) both of these ETFs or their mutual fund equivalents will consistently and markedly outperform VYM on dividends. REITs come with their own tax complications, but since you will be taking the dividends rather than reinvesting them, I think that mitigates the penalty that dividend reinvestors encounter on juicy REIT income.

Can't advise on investing in these vehicles outside Vanguard, however. Best of luck to you!

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Re: Buy some VYM?

Post by MotoTrojan » Tue Nov 12, 2019 9:39 pm

Cornflakey wrote:
Tue Nov 12, 2019 7:15 pm
I'm also a contrarian dividends aficionado.

My comment would be if looking for high and consistent Vanguard dividend yield turn to utilities (VPU) or to REITs (VNQ). As a long term investor in all three (reinvesting dividends) both of these ETFs or their mutual fund equivalents will consistently and markedly outperform VYM on dividends. REITs come with their own tax complications, but since you will be taking the dividends rather than reinvesting them, I think that mitigates the penalty that dividend reinvestors encounter on juicy REIT income.

Can't advise on investing in these vehicles outside Vanguard, however. Best of luck to you!
I believe the the new tax-law has changed some things, but REIT dividends used to be unqualified which is not mitigated by the investor simply taking the dividend. You'd pay income tax rather than long-term gains from something like VYM or VTI.

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Re: Buy some VYM?

Post by HEDGEFUNDIE » Tue Nov 12, 2019 9:43 pm

VYM is the equity component of Wellesley, so if you like Wellesley, no reason not to own YVM separately.

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Re: Buy some VYM?

Post by grabiner » Tue Nov 12, 2019 9:54 pm

LilyFleur wrote:
Tue Nov 12, 2019 2:07 pm
I am already retired (age 60) and am going to need more cash flow. I am thinking of buying $100,000 of VYM in my Schwab brokerage account (I would sell money market shares to do this.) The dividends would not be reinvested, and I would use them for living expenses.

I also have a $100,000 home loan (my only debt) which I could pay off at any time. I may need the interest from the mortgage in order to itemize on my taxes but I need to run the various scenarios, and it gets complicated
Since you have the cash available, paying off the home loan gives you a risk-free return equal to the mortgage rate. That may be a good deal even if it is all deductible (assuming you are single, this would require $2400 in charitable contributions to go with $10,000 in state taxes), and it is a better deal if it is only partially deductible.

In addition, paying off the mortgage would reduce the amount of income you need from your taxable account, so you could hold lower-dividend stocks there for a lower tax bill, and not need to sell anything.

But even if you don't pay off your mortgage, it is probably better to hold lower-dividend stocks rather than VYM in your taxable account. If you need to spend $30K and have $30K in dividends, you pay tax on $30K. If you need to spend $30K and have $20K in dividends, you can raise the other $10K by selling stock for a long-term capital gain, which is only partially taxable. And you will have the same dollar value in stock either way (assuming the high-dividend and low-dividend stocks have the same returns). If you like VYM, it's better in an IRA.
3. What is the best timing to buy VYM? After the next dividend payout to allow enough time for my first dividend payout to be qualified dividends? (don't you have to have the stock for more than 60 days in order for the dividends to be qualified?)
You have to hold the stock for 61 days including the dividend date. Thus, if you buy a stock ETF, tomorrow (11/13) and sell it on 1/13/20 or later, any dividend it paid is qualified to you as long as it was qualified to the fund.

The reason to wait until after a dividend payout to buy is that you avoid paying tax on that dividend. But for a stock ETF paying quarterly dividends, that tax cost is trivial; you expect to lose more by staying out of the market for a month than the tax you would pay on the December dividend.
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Re: Buy some VYM?

Post by LilyFleur » Wed Nov 13, 2019 12:54 am

I just checked on VYM today, and on the Vanguard summary for 2018, its dividends taxed at the long-term capital gains rate were 100% qualified dividends. As I understand it, qualified dividends are taxed at the same rate as long-term capital gains. This is money that I will most likely need beginning next year. So, I suppose if I buy a stock that doesn't throw off significant dividends (instead of VYM), then I would simply sell part of the stock as I need it, and since I am selling it so soon, a very small portion of it will be taxable at the capital gains rate, anyway. Is that a correct understanding?

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Re: Buy some VYM?

Post by MotoTrojan » Wed Nov 13, 2019 1:03 am

LilyFleur wrote:
Wed Nov 13, 2019 12:54 am
I just checked on VYM today, and on the Vanguard summary for 2018, its dividends taxed at the long-term capital gains rate were 100% qualified dividends. As I understand it, qualified dividends are taxed at the same rate as long-term capital gains. This is money that I will most likely need beginning next year. So, I suppose if I buy a stock that doesn't throw off significant dividends (instead of VYM), then I would simply sell part of the stock as I need it, and since I am selling it so soon, a very small portion of it will be taxable at the capital gains rate, anyway. Is that a correct understanding?
Correct. You'd ideally be selling off shares that have been held at-least a year so you pay capital gains rate, just like you would with most dividends from a broad index equity fund. A dividend, taxes aside, is basically just a forced sale. So if both cases result in long-term capital gains rates then there is no advantage to the dividend fund and you are simply less diversified. Some people feel that dividend producing companies have outsized returns, but most of that has been shown to come from other factors (such as value and quality).

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Re: Buy some VYM?

Post by birdog » Wed Nov 13, 2019 4:48 am

I would probably just go with the vanguard total stock market index fund due to its better historical performance.

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Re: Buy some VYM?

Post by rossington » Wed Nov 13, 2019 12:52 pm

LilyFleur wrote:
Wed Nov 13, 2019 12:54 am
So, I suppose if I buy a stock that doesn't throw off significant dividends (instead of VYM), then I would simply sell part of the stock as I need it, and since I am selling it so soon, a very small portion of it will be taxable at the capital gains rate, anyway.
I don't understand this. I thought you did not want to "sell" principal but rather "take" the dividend payout from whatever you ultimately invest the 100k in. Correct?

What is your capital gains rate?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: Buy some VYM?

Post by LilyFleur » Wed Nov 13, 2019 1:14 pm

rossington wrote:
Wed Nov 13, 2019 12:52 pm
LilyFleur wrote:
Wed Nov 13, 2019 12:54 am
So, I suppose if I buy a stock that doesn't throw off significant dividends (instead of VYM), then I would simply sell part of the stock as I need it, and since I am selling it so soon, a very small portion of it will be taxable at the capital gains rate, anyway.
I don't understand this. I thought you did not want to "sell" principal but rather "take" the dividend payout from whatever you ultimately invest the 100k in. Correct?

What is your capital gains rate?
15%. I am in that bracket for life, until the government changes the brackets/rates.

I do like dividends, but now (reading the comments above) I am seeing the advantage of a stock that doesn't produce high dividends in a brokerage account (ie, more control over when I take the income by selling stock instead of receiving dividends). In order to wait to take money out of a low-dividend stock for a year (to make sure I didn't get taxed at regular income tax rates instead of capital gain rates), I could use up some other income sources that I'd like to not have in my estate anyway (I have an inherited IRA that would keep me going for at least a year that I don't want to leave to my children because I have read here on BHs that they are problematic.)

In the future, I am going to need to do some Roth conversions, and not having bigger dividends could help me not fall off the higher IRMAA cliffs. In fact, I should probably start the conversions this year.

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Re: Buy some VYM?

Post by LilyFleur » Wed Nov 13, 2019 1:25 pm

birdog wrote:
Wed Nov 13, 2019 4:48 am
I would probably just go with the vanguard total stock market index fund due to its better historical performance.
VTSAX?
I see the last dividend payout for VTSAX was $0.33890 per share, compared to $0.78640 per share for VYM.

I guess it's difficult to completely get away from dividends, but at least the dividends from VTSAX would be taxable at the LTCG rate after 60 days, and it would get that money out of the money market, which I am paying regular income taxes on my MM dividends.

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Re: Buy some VYM?

Post by LilyFleur » Wed Nov 13, 2019 1:35 pm

Jack FFR1846 wrote:
Tue Nov 12, 2019 2:58 pm
I'm no expert on VYM, but in my 10 second reading of it, does it not spill dividends? If so, you have no control over this income coming to you even if you're near a cliff.

I've thought that in this kind of situation, you want the opposite. No dividends, no cap gains until YOU decide you want some cash and YOU decide how much. So opposite world could be BRK/b, which of course pays no dividends. So if you're in a year where 20 cents more in income means no ACA subsidy, with VYM (my understanding), you've now given it up where with BRK/b, you simply don't sell.
My pension pushed me off the ACA subsidy cliff and I'll never get the subsidy now. I may get pushed off the first IRMAA cliff as well due to Roth conversions. I guess my goal needs to be to make enough money to pay my insurance premiums and to be able to itemize if possible. Taxes are difficult for a single person in CA.

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Re: Buy some VYM?

Post by LilyFleur » Wed Nov 13, 2019 1:44 pm

rossington wrote:
Tue Nov 12, 2019 4:42 pm
LilyFleur wrote:
Tue Nov 12, 2019 2:36 pm

Thanks for your response! I have read extensively the dividend-no dividend debates here, and I do fall on the side of liking dividends. If I simply start spending the cash, I lose my cash, rather than spending earnings. (I am not receiving subsidies on the ACA, so I do not have a super strong reason to spend cash only.) And I do want to preserve some cash for Roth conversions and to pay off my mortgage. VYM, I think, will earn more dividends each year for me to spend than my MM dividends. My risk tolerance is very high, and in fact I am a bit uncomfortable having the AA I currently have because my equities are very low compared to my past investing history. I did receive cash recently that changed my AA. I parked it in a MM to really consider what I wanted to do, but the Fed lowering interest rates has helped me want to increase my equity portion of my AA.
Based on what you have stated here I am going to make a non-Boglehead suggestion which might apply to you. Take a look at the electric utility Dominion Energy (I know, it's an individual stock :shock: ). It is a proven dividend paying stock, fundamentally sound, very well managed,very low beta and as far as utilities go very safe. We're not talking PG&E here by any standard. It is cheaper than VYM and pays a higher dividend. Also it is one of the components of VYM (almost 3 mill. shares). Market volatility (which applies to both choices) is not as big an issue as you are looking primarily for the qualified dividends.
Just a thought... :happy
OK, despite all the wonderful Boglehead advice, I think buying some of this might be a possibility for me. I LIKE dividends. And, I got to be a BH through some extremely non-BH behavior, hahaha, otherwise I would be in some horrible underpaid job instead of here on this forum.

I shall consider buying it in a pre-tax account, though, at first.

(I know, I know, I may sound contradictory, but my situation is complicated. This forum has opened my eyes to all the options available to me and to the myriad of tax implications. I enjoy reading about other BH's situations, but when it comes to investing in a taxable account, I get a little stymied, even though I do maintain a very complicated spreadsheet that estimates my tax bill both for federal and state taxes.)

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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by nedsaid » Wed Nov 13, 2019 1:50 pm

Jack Bogle discussed the issue of income, it seemed important to him. He advised reaching for yield a bit but not by too much. You could take a slice of your Total Stock Market Index holdings and exchange it for some Vanguard High Dividend Index to stretch dividend yields from stocks a bit. In a similar fashion, you could take a slice of your Total Bond Market Index and exchange it for Vanguard's Investment Grade Corporate Bond fund. Don't make the mistake of chasing yield too hard, don't go crazy on REITs and don't pile into High Yield Bonds. Your idea seems sensible to me.
A fool and his money are good for business.

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Re: Buy some VYM?

Post by rossington » Wed Nov 13, 2019 2:40 pm

LilyFleur wrote:
Wed Nov 13, 2019 1:14 pm
rossington wrote:
Wed Nov 13, 2019 12:52 pm
LilyFleur wrote:
Wed Nov 13, 2019 12:54 am
So, I suppose if I buy a stock that doesn't throw off significant dividends (instead of VYM), then I would simply sell part of the stock as I need it, and since I am selling it so soon, a very small portion of it will be taxable at the capital gains rate, anyway.
I don't understand this. I thought you did not want to "sell" principal but rather "take" the dividend payout from whatever you ultimately invest the 100k in. Correct?

What is your capital gains rate?
15%. I am in that bracket for life, until the government changes the brackets/rates.

I do like dividends, but now (reading the comments above) I am seeing the advantage of a stock that doesn't produce high dividends in a brokerage account (ie, more control over when I take the income by selling stock instead of receiving dividends). In order to wait to take money out of a low-dividend stock for a year (to make sure I didn't get taxed at regular income tax rates instead of capital gain rates), I could use up some other income sources that I'd like to not have in my estate anyway (I have an inherited IRA that would keep me going for at least a year that I don't want to leave to my children because I have read here on BHs that they are problematic.)

In the future, I am going to need to do some Roth conversions, and not having bigger dividends could help me not fall off the higher IRMAA cliffs. In fact, I should probably start the conversions this year.
I would assume that the standard deduction keeps you well below the IRMAA threshold..or no? You could do conversions up to the threshold each year to avoid falling off the cliff. Also does the SD give you any wiggle room on the cap. gains? My only concern would be that buying any fund/stock with today's high market valuations might not appreciate to the point you're getting the cap. gains you desire so you have to sell a portion of your portfolio anyway. At least a dividend payout of "x' dollars is somewhat guaranteed depending on the quality of the investment, that was my reasoning in the example of "D" stock above. If you have calculated that the income produced by the 100k is what you need (whether it is 2-4% + and qualified) then adjusting for that amount for taxes shouldn't be too difficult. (e.g.:Subtract the dividend amount from your conversion amounts?).
How long have you had the inherited IRA and is the RMD taxable?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by LilyFleur » Wed Nov 13, 2019 2:56 pm

I think about a year and a half. It is not huge, my RMD for this year is about $2,000. I actually designated all of it to be withheld for taxes.
The income source that may be going away that I may need to replace for next year was fully taxable, and so is this inherited IRA.
To make any significant progress on Roth conversions, I probably will progress through several IRMAA cliffs. I could probably stay just below the $160,000 cliff.
I am 60, though, and I guess I have until 63 before I have to consider the IRMAA cliffs.
That means I definitely need to do some aggressive Roth conversions this year and the next couple of years, and then perhaps ratchet back a bit when I hit 63.
I am not sure what is a reasonable/doable goal for conversions on my 401k, and of course, it will keep growing in the next ten years before RMDs. Just to convert half of the current 401k balance would mean conversions of $50,000 a year for the next ten years. And a lot of that conversion would be in the 24% bracket. I only have about $10,000 of space left in the 22% bracket currently. I guess this is the dark side of having a pension, and money market dividends :oops:

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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by rossington » Wed Nov 13, 2019 3:56 pm

LilyFleur wrote:
Wed Nov 13, 2019 2:56 pm
I think about a year and a half. It is not huge, my RMD for this year is about $2,000. I actually designated all of it to be withheld for taxes.
The income source that may be going away that I may need to replace for next year was fully taxable, and so is this inherited IRA.
To make any significant progress on Roth conversions, I probably will progress through several IRMAA cliffs. I could probably stay just below the $160,000 cliff.
I am 60, though, and I guess I have until 63 before I have to consider the IRMAA cliffs.
That means I definitely need to do some aggressive Roth conversions this year and the next couple of years, and then perhaps ratchet back a bit when I hit 63.
I am not sure what is a reasonable/doable goal for conversions on my 401k, and of course, it will keep growing in the next ten years before RMDs. Just to convert half of the current 401k balance would mean conversions of $50,000 a year for the next ten years. And a lot of that conversion would be in the 24% bracket. I only have about $10,000 of space left in the 22% bracket currently.
Get together with your accountant well before the end of this year and run some tax strategy scenarios for 3,5,10 years out that can be tweaked along the way when necessary. You might be overthinking this whole thing. A lot can happen in 10 years! Our theory is let the portfolio continue to work for us first and "worry" about the tax "problem" second. (It is easier for me to say that since we live in FL...no state income tax 8-))
I guess this is the dark side of having a pension, and money market dividends :oops:
You're doing great, there are MANY people out there who would love to have your "problem". :beer
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by Bronco Billy » Wed Nov 13, 2019 7:11 pm

I am trying to keep an open mind about whats wrong with buying Stock or funds that pay good dividends. I been in the 22-24% tax bracket and don't see what is wrong with paying the lesser 15% tax for Dividends and capital gains. I bought 75k of SPHD a few weeks ago that pays a monthly dividend. I can see if I was in the 15% tax bracket I would be all in with VFAIX or FXAIX.

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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by LilyFleur » Wed Nov 13, 2019 8:32 pm

Bronco Billy wrote:
Wed Nov 13, 2019 7:11 pm
I am trying to keep an open mind about whats wrong with buying Stock or funds that pay good dividends. I been in the 22-24% tax bracket and don't see what is wrong with paying the lesser 15% tax for Dividends and capital gains. I bought 75k of SPHD a few weeks ago that pays a monthly dividend. I can see if I was in the 15% tax bracket I would be all in with VFAIX or FXAIX.
If you end up paying more for your Medicare because you fall off the IRMAA cliff(s) (the first one is if you exceed $85,000 (if you are single), and there are detailed discussions here on Bogleheads about what counts as income for IRMAA. Whereas if I buy a stock with lower dividends, more of my income is under my control, and I can choose to sell stock if I need to. (And even if I doubled the value of a particular stock, the capital gains taxable portion of the sale of it would only be 50% taxable then.) If I understand this correctly...
But I still do love the idea of dividends...

Bronco Billy
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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by Bronco Billy » Wed Nov 13, 2019 9:37 pm

LilyFleur wrote:
Wed Nov 13, 2019 8:32 pm
If you end up paying more for your Medicare because you fall off the IRMAA cliff(s)
Not a problem, I am on my wifes medical, she younger making good money. I just retired in July and believe it will be hard to get down into the 15% tax bracket next year.

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birdog
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Re: Buy some VYM?

Post by birdog » Thu Nov 14, 2019 11:59 am

LilyFleur wrote:
Wed Nov 13, 2019 1:25 pm
birdog wrote:
Wed Nov 13, 2019 4:48 am
I would probably just go with the vanguard total stock market index fund due to its better historical performance.
VTSAX?
I see the last dividend payout for VTSAX was $0.33890 per share, compared to $0.78640 per share for VYM.

I guess it's difficult to completely get away from dividends, but at least the dividends from VTSAX would be taxable at the LTCG rate after 60 days, and it would get that money out of the money market, which I am paying regular income taxes on my MM dividends.
Sure. VTSAX or VTI, since you're comparing it to the ETF divdend fund, VYM. I realize the dividend paid by VYM is more than what is paid by VTI. (That's actually a downside for me.) What I'm actually referring to is the total return. VTI total return (share price plus dividends paid) is better than the total return of VYM. (Or at least it has been since 2006, which is the max time frame available to compare these two at portfoliovisualizer.com.) That's what matters more to me. VYM has a lower total return and pays in a less tax-efficient way. That being said, if you're in love with the higher dividend yield of VYM over VTI, I don't see this as a huge mistake. Below is a link to an article you might benefit from.

https://www.whitecoatinvestor.com/selli ... dividends/

Vanguard Fan 1367
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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by Vanguard Fan 1367 » Thu Nov 14, 2019 9:05 pm

I bought some VYM after I heard John Bogle say that might be something to consider. It has done very well for me.

After spending some time here on Bogleheads I wish that I had gone with Vanguard's Total Stock Market because of the extra taxes I pay on the higher dividend of VYM. My long term plan is to get rid of the VYM and other funds and go to Total Stock Market for simplicity.

TropikThunder
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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by TropikThunder » Fri Nov 15, 2019 1:08 am

Vanguard Fan 1367 wrote:
Thu Nov 14, 2019 9:05 pm
I bought some VYM after I heard John Bogle say that might be something to consider. It has done very well for me.

After spending some time here on Bogleheads I wish that I had gone with Vanguard's Total Stock Market because of the extra taxes I pay on the higher dividend of VYM. My long term plan is to get rid of the VYM and other funds and go to Total Stock Market for simplicity.
Should never have listened to that Bogle guy. :twisted:

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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by Vanguard Fan 1367 » Fri Nov 15, 2019 1:29 pm

TropikThunder wrote:
Fri Nov 15, 2019 1:08 am
Vanguard Fan 1367 wrote:
Thu Nov 14, 2019 9:05 pm
I bought some VYM after I heard John Bogle say that might be something to consider. It has done very well for me.

After spending some time here on Bogleheads I wish that I had gone with Vanguard's Total Stock Market because of the extra taxes I pay on the higher dividend of VYM. My long term plan is to get rid of the VYM and other funds and go to Total Stock Market for simplicity.
Should never have listened to that Bogle guy. :twisted:
Bogle also likes simplicity and not many funds. I am working towards that. :happy

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1789
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Re: Buy some VYM [Vanguard High Dividend Yield]?

Post by 1789 » Sat Nov 16, 2019 5:47 pm

Dividend investing is called an anomaly by financial theorists and it creates a separate place in investors mind. This is all psychological and has nothing to do with scientific research or historical returns. Dividend investors psychologically focus on price of stocks rather than total returns. One can create what they call as dividend return by just selling stocks. Please take a look at “ Your Complete Guide to Successful and Secure Retirement” by Larry Swedroe and Kevin Grogan. Appendix section D is dedicated to dividend investing. Better stick with total market indices.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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